The McBride Capital team recently attended the 20th Annual Western States CREF Conference in Las Vegas, NV. The conference draws nearly 1,000 lenders and brokers from across the nation who provide their insight into specific markets and product types.
The conference is a great opportunity to network with lenders to gauge movements in the market and understand developing trends in commercial real estate. During the conference the McBride Capital Team attended nearly 20 dedicated meetings with lenders, ranging from Life Companies to Hard Money Lenders.
The mood throughout the conference was optimistic - with a few grey areas. Here are some of our takeaways:
One of the headlines that radiated throughout the conference was the release of Fannie Mae's Small Balance Hybrid Program. The program is designed to compete with Freddie Mac's Small Balance program, which has been particularly advantageous in the Portland Market. Fannie Mae continues to be more competitive in secondary and tertiary markets.
Fannie also hit the headlines recently by removing Portland as a top market. Recent studies show an uptick in vacancy and slightly depressed rents in Portland's urban core. Not surprisingly, much of this has been driven by the large volume of high end units that have come online over the past year. Meanwhile, Freddie Mac has remained bullish on the Portland market.
While the overall feel throughout the conference was very positive, the one product type that has a lot of lenders hesitating is retail. Many are waiting to see how the move to online sales will shake out and how big box retailers and large shopping malls can evolve to stay relevant in the changing times. Amazon's move to purchase Whole Foods shocked a lot of people and has many wondering if grocery anchored retail will soon be in jeopardy as well.
On the other hand there are also many retail shopping centers that face less pressure from online sales and, if the fundamentals are strong, there are still a lot of capital sources available to borrowers.
The industrial market is still in high regard with lenders the McBride team met with. The Portland market in particular has remained hot and is gaining more momentum as the Portland area is seeing its largest industrial developments in its history happening in multiple locations. Gresham and Troutdale have seen the most significant growth of industrial development as the cities have welcomed developers and have some of the last large parcels of land with the correct topography to accommodate large industrial projects.
The construction market across all property types has continued to tighten as banks have been pulling back in the amount of dollars issued at any one time and have increased their underwriting parameters, limiting loan proceeds. This has impacted life company construction lending as well as the amount of deals now flowing to them has increased significantly and allows for a more selective process.
The majority of lenders we met with were optimistic about the economy and expect 2018 to be similar to 2017. Interest rates have helped to keep commercial real estate markets hot and while many have forecast rising rates for years (which never materialized) most believe the low interest rate environment is here to stay for the near term.